Gold futures score first climb in four sessions

PolyaLesova

SAN FRANCISCO (MarketWatch) — Gold futures won back some of their recent losses Thursday, as talk over whether Washington will be able to avert large-scale U.S. spending cuts and tax hikes put overall pressure on the dollar and boosted demand for riskier assets.

Gold for December delivery
GCZ2, +1.13%
rose $10.70, or 0.6%, to settle at $1,727.20 an ounce on the Comex division of the New York Mercantile Exchange.

February gold
US:GCG3
the contract traded most actively, settled at $1,729.50 an ounce, also tacking on $10.70, or 0.6%.

The price recovery followed a convergence of technical selling, deflationary concerns and strength in the U.S. currency that sank December gold futures by $25.80 on Wednesday. The contract had slumped as much as $36.80 at one point Wednesday, which marked gold’s third-losing session in a row. Read: Gold slammed.

Brien Lundin, editor of Gold Newsletter, said he fully expected a rebound after the previous day’s drop.

“Once longer-term investors could see that there wasn’t going to be follow-through selling, then they could safely view yesterday’s selloff as a ‘one-hit wonder’ and begin taking advantage of the bargain prices created,” he said.

“The longer-term fundamentals, with major [quantitative easing] ahead in both the U.S. and Europe, still favor gold,” Lundin said. “And the technical picture, with a rounding-bottom, ‘cup-and-handle’ formation in gold similar to that of late 2008, argues for a very powerful breakout to the upside at some point.”

Politicians talk

Comments from New York Fed President William Dudley Thursday also helped provide a lift to gold. Dudley said the unemployment rate is unacceptably high as he weighs whether the Fed should continue bond purchases into 2013.

“Dudley’s remarks are supportive of gold today, as the Fed contemplates extending [the easing program known as] Operation Twist or perhaps going further to purchase Treasurys outright rather than simply swapping duration, in addition to continued MBS [mortgage-backed securities] buying,” said Sonny Tahiliani, managing director of MacroMoves.

For now, the rebound in gold was supported by overall weakness in the dollar amid some optimism about the potential for a deal to avert the hundreds of billions in spending cuts and tax hikes, known as the fiscal cliff, slated to kick in at the start of the year.

On Wednesday, House Speaker John Boehner and President Barack Obama voiced optimism about reaching a fiscal-cliff deal but on Thursday, Boehner said there has been “no substantive progress” in talks between the Obama administration and House Republicans. See: No major progress in ‘cliff’ talks: Boehner.

“The debt ceiling is about to be breached; more and more people are relying on the government for assistance; interest rates remain extremely low; the Middle East is on the verge of war; Europe is in an even more dire situation than the U.S. — all of this is bullish for gold and will not change for a long time,” Beahm said. See The Tell blog: Gold seen winning whether or not U.S. hits fiscal cliff.

Accordingly, “investors are taking advantage of [Wednesday’s pullback] and buying gold,” Beahm said. “Gold is up over $20 from yesterday’s low. This trend will continue for the rest of this year and into 2013.”

Silver, copper lead

Other metals finished higher as well, with silver and copper leading the advance.

March silver
US:SIH3
jumped 66 cents, or 2%, to $34.43 an ounce and March copper
US:HGH3
added 7 cents, or 1.9%, to settle at $3.61 a pound.

“Copper has broken out of its base through $3.55, indicating that attitudes toward the global economy in general, and China in particular, are starting to improve,” said Colin Cieszynski, senior market analyst at CMC Markets Canada, in a note.

March palladium
US:PAH3
also climbed, up $12.25, or 1.8%, to $687.45 an ounce, while January platinum
US:PLF3
added $7.80, or 0.5%, to $1,619.50 an ounce.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.